A similar scenario is playing out across more and more U.S. cities: homes are as affordable as ever, to the point where buying is cheaper than renting. But many buyers cannot get access to tantalizingly affordable mortgages due to tighter credit standards from a banking system that is extra-cautious after the disastrous consequences of irresponsible lending in years past.

Online real estate search engine Trulia.com reports in its Summer 2011 Rent Vs. Buy Index that in 74 percent of the 50 largest U.S. cities purchasing a home is cheaper than renting. Trulia’s index, which compares the median list price with the median rent on two-bedroom apartments, condominiums and townhomes listed on Trulia.com as of July 1, finds that the battered housing markets of Las Vegas, Detroit and Mesa, Ariz., are among those where buying a home is much less expensive than renting.

On the other end of the spectrum are the housing markets of New York, N.Y., Fort Worth, Texas, Omaha, Neb., along with other coastal cities like San Francisco and Seattle where it is much more expensive to buy than rent.

The Catch-22 of everything is that even in markets where housing affordability is at record levels, making the switch from renter to owner is hardly a formality.

“Prospective homebuyers, who are ready and qualified to buy, face an uphill battle despite falling home prices and record-low mortgage rates,” says Ken Shuman, Trulia’s head of communications. Stricter standards on residential mortgage in the wake of the subprime meltdown has “dragged out the home buying process” and forced many qualified buyers to remain renters, according to Shuman.

While the price trends in cities like Las Vegas and Detroit would seem to suggest that anyone with enough money for a down payment should race to the bank for a mortgage, Shuman also warns that price alone should not be the only factor in the rent vs. buy decision. “Buyers should ask themselves if they plan to live in the home for at least seven-to-10 years, can make monthly payments on the house, and have enough cash in the bank for a down payment and an additional six to eight months worth of mortgage payments.”

Of course, there are also complicating factors like the Federal Reserve’s recent decision to signal its intent to keep interest rates low until mid-2013, which may remove some urgency to buy for the time being.

Foreclosures cloud the picture
There is also the issue of foreclosures, which have made it difficult to get a read on some markets. Miami, for instance, remained among the cities where buying is less expensive than renting in Trulia’s report, but the price/rent ratio jumped 112 percent from January to July. Trulia attributes that increase to “a mini-buying boom created by foreign investors and foreclosure freezes.”

Not all cities flooded with foreclosures can be painted with that same brush. Detroit has seen recent job gains thanks to a recovering automotive industry — with General Motors and Chrysler both out of bankruptcy — but that has done little to stem the tide of falling home values, which put the price/rent ratio down 39 percent from six months earlier.

The foreclosure issue and banks’ reticence to ramp up lending are also intertwined. For an example just look at Bank of America, which many investors hoped was closer to the end of its mortgage troubles than the start, but was slapped with a fresh $10 billion lawsuit tied to mortgage-backed securities by American International Group just last week.

The dynamics of buying vs. renting are unlikely to tip toward favoring renting anytime soon. Analysts who track the real estate investment trusts (REITs) that own and operate apartment buildings have noted the overbuilding of single-family homes in the last decade led to insufficient inventory of multi-family dwellings. Turnover rates for apartment REITs are at record-low levels, Raymond James analyst Buck Horne said in an interview last month, and that means that in many high-demand areas rents will be on the rise.

That trend is already beginning, as reflected in Trulia’s finding that in 37 of the 50 cities it tracks, buying is less expensive than renting, but the difficulty in getting mortgages and uncertainty of whether home prices still have further to fall is still keeping many prospective owners on the sidelines.